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“The pillage of the future by the present”


Here’s an interesting essay by German philosopher Peter Sloterdijk from The City Journal on The Grasping Hand of the modern democratic state and what it might mean. Here’s a bit go read the whole thing:

The modern democratic state pillages its productive citizens.

To assess the unprecedented scale that the modern democratic state has attained in Europe, it is useful to recall the historical kinship between two movements that emerged at its birth: classical liberalism and anarchism. Both were motivated by the mistaken hypothesis that the world was heading toward an era of the weakening of the state. While liberalism wanted a minimal state that would guide citizens almost imperceptibly, leaving them to go about their business in peace, anarchism called for the total death of the state. Behind these two movements was a hope typical of the European nineteenth century: that man’s plunder of man would soon come to an end. In the first case, this would result from the elimination of exploitation by unproductive classes, that is, the nobility and the clergy. In the second case, the key was to reorganize traditional social classes into little groups that would consume what they produced. But the political history of the twentieth century, and not just in its totalitarian extremes, proved unkind to both classical liberalism and anarchism. The modern democratic state gradually transformed into the debtor state, within the space of a century metastasizing into a colossal monster—one that breathes and spits out money.

This metamorphosis has resulted, above all, from a prodigious enlargement of the tax base—most notably, with the introduction of the progressive income tax. This tax is the functional equivalent of socialist expropriation. It offers the remarkable advantage of being annually renewable—at least, in the case of those it has not bled dry the previous year. (To appreciate the current tolerance of well-off citizens, recall that when the very first income tax was levied in England, at the rate of 5 percent, Queen Victoria worried that it might have exceeded acceptable limits. Since that day, we have become accustomed to the fact that a handful of productive citizens provide more than half of national income-tax revenues.)

When this levy is combined with a long list of other fees and taxes, which target consumers most of all, this is the surprising result: each year, modern states claim half the economic proceeds of their productive classes and pass them on to tax collectors, and yet these productive classes do not attempt to remedy their situation with the most obvious reaction: an antitax civil rebellion. This submissiveness is a political tour de force that would have made a king’s finance minister swoon.

39 comments to “The pillage of the future by the present”

  • Veruckt

    Outstanding article. You really do have to stop and take an unbias look at our current situation and wonder realistically how long can we sustain this sort of irresponsibility? Right now we are living in sort of an economic fantasy land where the money never runs out and the creditors never call, sort of like MC Hammer in the early 90s but at some point the fantasy ends…again ask MC Hammer.

  • Rufus

    Great article! This is why I say, if I could change 1, and only 1 thing about our nation’s government with the wave of a wand I would repeal the 16th Amendment. The income tax is the tool that has made so much of the expansion of the Federal government possible. Not only has it led to much, much harm, it is anathema to all that our founders stood for. Taxing productivity?! It’s un-American. Why the 5% footing the bill for the lay abouts in our nation stand for this, I do not know.

  • I’m listening to Dennis Prager this morning. He’s playing a speech he gave to Republican pols in DC. He came up with a phrase that is appropriate here:

    The bigger the government, the smaller the citizen

  • BarryO

    This may be off topic, but the talk of taxes got me thinking. What about doing away with the progressive income tax and replacing it with a flat consumer tax on purchased goods? Everyone would pay the same rate no matter what you made. People operating illegal businesses and illegal immigrants would then pay a portion, increasing the government revenue, where currently they can avoid paying taxes by solely using cash.

    I know it doesn’t address the concept of what the tax is used for after it’s collected, but it seems simpler and far more comprehensive and equal taxation of ALL people.

    Any thoughts?

    • Rufus

      BarryO,

      The only real taxation in-line with our Constitution (ignoring the abysmal 16th Amendment) is a consumption tax. That’s what the word, “tax” meant to our founders. The term, “flat tax” is primarily used to describe a non-progressive tax on income. While I believe this would be an improvement on our current system, and I would vote for it for that reason, I am against this approach.

      As you outline, a consumption tax is the only real, fair and true tax, but I wouldn’t make it flat across all goods. There should be a basket of “necessities,” (bread, milk, eggs, cereal, rice, flour, Reese’s Peanut Butter Cups, some clothing…) that are exempt from Federal taxes. And, I would assume (and I’m in favor of this), Congress would want to have higher tax rates for “luxury items;” maybe you pay 15% when you buy arugula and 5% when you buy kraft singles.

      Now, I know this invites gobs of debate and frustration, and gives Congress a great deal of control, but, it also points it all out on the table. Right now Congress steals our money as we earn it, and then they make closed door deals with lobbyists on who is going to get which tax break, or subsidy. Under a consumption tax we’ll know what tax rate Congress has put on what.

      • Raoul Ortega

        There should be a basket of “necessities,” (bread, milk, eggs, cereal, rice, flour, Reese’s Peanut Butter Cups, some clothing…)

        Your priorities are off. You left out beer and toilet paper.

    • Rufus

      BarryO,

      Here’s a post on this subject I wrote awhile back, http://www.threedonia.com/archives/6252
      The income tax truly is an abomination. One of the most anti-American things any Congress has ever done.

    • Veruckt

      BarryO,

      I would 100% favor that. There has been a very detailed proposal in Washington for quite sometime called the Fair Tax but thus far they are unwilling to discuss it. You can learn more about it at http://www.fairtax.org . Washington, either side, doesn’t want this because most of our taxes are “stealth taxes” we are not even aware of and as Rufus pointed out this would be far more transparent. Washington does not like transparency. The Fair Tax I believe even has provisions built in to reimburse taxes to people who meet certain economic criteria to offset increased cost.

      I would like to see a provision built into easing taxation on purchases related to business to avoid the consumer effectively paying the tax twice; ie the owner of the business paying the tax and passing it on to the consumer, then the consumer paying the tax again, with that provision built in I think it would be as close to perfect as it could get. Also people of all political beliefs would be more willing to fight excessive taxation and irresponsible spending if the taxes were so obvious. It would bridge some nasty partisan divides but again Washington doesn’t want that since divided we are pretty weak.

    • I’d be all for that, Barry. Rufus, I don’t think they should charge different rates for different products, because that would put too much control into government hands. Give taxpayers a rebate for the tax assessed on the first $5,000 or so dollars per person (in other words, whatever food and clothing costs a year).

      • Rufus

        Mike,

        I don’t see how you avoid it. Your idea of a rebate is a good one, and maybe that should be included, regardless, but there is no way you’ll keep Congress from inventing new taxes and incrementing existing ones. And that’s what the founders had in mind. Also, this says nothing about what States can do, or will do. Technically states can still charge income taxes if they want to, and you’ll always have state and local sales taxes on different things. Look at hotel rooms today. Even if you pass a Constitutional amendment that states the rate has to be the same for eveyrthing, they’d still sneak “sin” taxes in, under a different name. “This product pollutes more than that one, we’re tacking on an additional environmental fee.” “This product is less healthy than that one, we’re tacking on an additional Medicare fee…”

        Like I wrote earlier, I have no illusions this will not quickly devolve to an ugly system too; it is Congress after all, but at least it would be a system built around the right principles.

  • Mighty Skip

    The idea that the Marxist notion of the rich exploting the poor has been turned upside down is something I try to get my liberal friends to understand every day. To no effect as to them such a thing is impossible. However, I think I’ll be sending this article their way.

    As for tax reform and BarryO’s comment, that idea has been kicked around for quite some time. Even by Democrats who manage to muck it up by suggesting having that kind of tax and still retain the income tax. Sigh…

    I think the idea could sell, if you make it abundantly clear you are going to get rid of income tax entirely and convince people there’d be no loopholes. “The rich don’t pay what you say they pay because they have all these loopholes” is the numero uno argument I hear from people. They are convinced, rightly or wrongly, that any kind of tax even this consumer tax would be avoided by the wealthy. Ah populism at its best. If someone could assure people that kind of tax would be effective it would go a long way to convincing the voting public.

    • Rufus

      Mighty Skip,

      A consumption tax does make black market activity more worthwhile, and we’d almost definitely see more of it. Yes, the rich will find ways to avoid taxes, but they always do. There is a reason we all want to be rich. It’s good to be rich.

    • It’s not just loopholes, Skip. The rich often pay little tax because they don’t have much income. They have wealth, instead. A consumption tax would get at that wealth, in a fair way.

      • Rufus

        Except when the rich purchase from foreign countries with lower tax rates, or buy on the black market. Let’s be honest. There will be some of that, but trying to write a tax code that the rich can’t avoid is a fool’s errand. People with the resources will always find a way out.

  • Oregon just passed 2 measures – one taxes “the rich” (over $250,000) the other taxes “big business.” Oh, yeah, both taxes are retroactive 1 year. Gotta keep up with our neighbors to the South.

  • JohnFN

    … each year, modern states claim half the economic proceeds of their productive classes and pass them on to tax collectors, and yet these productive classes do not attempt to remedy their situation with the most obvious reaction: an antitax civil rebellion. This submissiveness is a political tour de force that would have made a king’s finance minister swoon.

    Because people in those countries are generally happy. When you have HD, WiFi, a fridge full of beer and a game on Saturday, who cares if you have to work until June or July to pay your tax bill.

    But what about in the future? Unless innovation kicks in and the market is allowed to do what it’s supposed to, we’ll eventually have a market-based economy through public stewardship, meaning more people taking from the teat than paying taxes. It’s dangerously close to that now in terms of income taxes (Thank you, George W. Bush, Bill Clinton, Barack Obama …). This group will be able to vote their will on the rest.

    I’ve seen effects of this in smaller towns where the largest employer is the local school district. Essentially the school employees can vote themselves any funds they want, and on the backs of those working private industry and paying the taxes. Where my brothers graduated, they just passed a tax to build a new school – this after doubling the size of the old school in 1999 with a renovation. To get state funding, the old school and the renovation are to be abandoned. The district is getting smaller, partly because of the new taxes. Eventually, you run out of other people’s money.

    This is happening all over Ohio, where a plethora of machine shops and small-town manufacturing businesses are gone due to the demise of the local auto industry. That leaves the schools and the local government as the No. 1 employers and that’s not a situation to be in, for numerous reasons. Living in towns like this, I can say it can get rather interesting.

    • Not even the greediest medieval king had the power to withhold taxes from your pay before you ever saw it. That makes it tough to rebel, because the money’s already gone.

      • Rufus

        Amen, Mike! The 16th Amendment legalizes criminal activity.

      • Raoul Ortega

        To me, the way to change/reduce taxes is simple: get rid of withholding, at all levels. Make people have to write a check annually, quarterly or monthly, like the self-employed and businesses have to do. Make people see how much they are really paying, especially when they gotta cough up a check that’s bigger than their rent, groceries and cable bill combines, every month.

        • Rufus

          Raoul,

          I agree that eliminating withholding would push some of this into the daylight. Right now Congress is like a thief in the night. Eliminating withholding would help, but it doesn’t address the fundamental issue that taxing productivity is an abomination. Addressing withholding is kind of like a politician in the 1850s arguing treating slaves as 4/5 of a person is better than treating them as 3/5 of a person. Yeah, I guess so, but allowing slavery in any form is the problem.

  • BarryO

    Yeah, consumption tax and kill off all income tax. The price for goods would go up (a whole new can of worms), but it would be more transparent where our money is going, and we would have more money in our pockets to decide whether to save or invest in industry. America needs to manufacture quality products. We don’t just simply need more government jobs that provide services.

  • Veruckt

    BarryO,

    Agreed again. You are on a roll. We eventually risk being a society completely and totally reliant on a government that, lets face it, is corrupt and inefficient no matter who is in power. The fair tax is by far the most viable solution available and I think it is something that people of all political beliefs can agree on. It has been making the rounds on the right for years and I’d love to see our friends on the left pick it up as well. This and term limits are two subjects largely agreeable to all political persuasions and great building blocks.

    Now Barry an opinion question. With the consumption tax (fair tax) would you favor doing away with corporate taxation? I’ve always been against it because I know any extra financial burden they face is simply shovelled on to the consumers or passed on to the employees in lower salaries and less hiring.

    • Raoul Ortega

      I’ve always been against it because I know any extra financial burden they face is simply shovelled on to the consumers or passed on to the employees in lower salaries and less hiring.

      Which makes it a hidden tax on individuals, and if your goal is to maximize how much to take from people without their realizing it, then you want it as big as possible.

    • BarryO

      Admittedly I am not up to speed on corporate taxation. My point of view is from the consumer. So speaking while typing, I would not necessarily throw out corporate taxation, because I believe (correct if I’m wrong) that it is a taxation of the profits. The dollar amount of the corporation’s profit would fluctuate, but not the percentage given up in tax.

      How does a corporation maximize profits? Simple, you charge more for your product, or, according to Marxist philosophy, you pay your workers less. Whether a person stays in a lower-paying job or whether consumers will pay more for a product will adjust accordingly to supply and demand.

      With an increased tax base from the consumption tax, then the government could reduce the tax rate on corporations as another option.

      It really won’t matter in the end. The big, bad government will want its money and will take it from either the consumer with a higher consumption tax rate or from the corporations by taxing their profit.

      • David Marcoe

        But a consumption tax has two factors that mitigate this: an ability to reduce the amount of taxes paid through reduced consumption and more transparency through a single tax rate that one sees at the register. In both cases, raising the rate becomes more problematic. Moreover, the relationship in taxation between citizen and government becomes less direct, reducing its invasiveness.

        The reason why jobs have left American shores is that we have the second highest corporate income tax rate in the world. That rate of taxation makes it cheaper to do business in places like India and China, when it would be cheaper to do it here if we reduced the tax rate. I find this video to be a great distillation of the point.

        • Rufus

          David,

          What are you basing this statement on? “The reason why jobs have left American shores is that we have the second highest corporate income tax rate in the world” I’m not doubting the second part, but I am questioning whether that’s the reason for jobs going overseas. I would think labor rates would be the greatest contributor. Also, most countries I know of have a value added tax, and those typically end up tacking on more taxes than the U.S.’s corporate income tax. (Phew, that’s a lot of tackses and taxes. We need to have Chico take upa the tacks first so he can take upa the carpet. You know Chico, he’s got’ta Uncle lives in Texas.)

          I’m not arguing with the statement, for all I know it’s right, I’m just wondering if you have a reference so I could see a break-down of U.S. corporate taxes vs. foreign.

          • David Marcoe

            The reference I have is an engineer friend who works at 3M as a production line and technical process troubleshooter, a job so specialized it doesn’t have a real title. In effect, he’s their “miracle worker” who’s called in to clean up messes and get projects back on track and holds enough clout to tell VPs to go pound sand. They send him all over the world to teach classes, conduct conferences and inspect factories. Per his position, he’s very involved with the corporate/financial aspect and through 3M, has an insider’s view of corporate industry as a whole.

            He’s told me much of what he’s heard from higher rungs up the ladder about how corporate investments have been going. He’s informed me that a lot business leaves our shores because of those high tax rates, where labor rates in poorer countries make the relative cost cheaper.

            • Rufus

              David,

              I understand the labor rates, as I stated earlier, but what does that have to do with corporate tax rates?

              Tax law is extremely complex. A Fortune 100 company may have hundreds of employees AND high paid consultants focused solely on their taxes. I won’t pretend to understand it all, not a single one of those hundreds of employees or consultants do, and they do it 40+ hours a week, 50 weeks a year, but I don’t see how moving work overseas gets a company out of paying income taxes on its earnings. You pay taxes on where you earn the money. Unless 3M has figured out a way to get more people in Congo or Zaire to buy post-it notes than folks in the U.S. they’ll pay taxes on the profits from those post-it notes. Actually, if they make the post-it notes in Congo where labor rates are low, low, low they’ll pay even more taxes because there is more profit.

              Again, this is all very complex, but from what I know V.A.T. taxes in most other 1st world countries more than outweigh the U.S. corporate taxes. And, unless 3M is literally moving its corporate headquarters overseas I’m not sure how they avoid paying U.S. corporate taxes. They are, a U.S. corporation. It’s true the tax guys and gals come up with a lot of schemes to beat the tax code, and some of that involves registering certain facilities in certain principalities, but from what I know the bulk of movement overseas is due to lower labor rates. That’s a much greater factor than taxes.

              An interesting, tangential to this conversation, states have started charging high paid athletes for the income earned in their state. Kobe Bryant earns about 23 million a year. If the Lakers play an 80 game schedule and he plays 4 games in Cleveland he’s earned a little over 1 million dollars in Ohio. If the tax rate in Ohio is 6% Ohio wants $60,000 from Kobe!

              • David Marcoe

                Corporations have divisions and subsidiaries, which might be owned by the home company, but also have to be incorporated/chartered/registered in whatever country they reside in. These are multinational corporations; conglomerates that are compound entities of smaller companies. For instance, 3M has certain foreign subsidiaries they won’t release certain manufacturing processes to, for fear of leaks.

                I also don’t pretend to understand all of it, but the crux of it is that high tax rates raise the overall cost of doing business, so that moving aspects of the business to developing world to exploit cheaper labor rates make the relative overall cost cheaper for those segments, even as the taxes maybe higher, relative to the US. That is, labor costs are so cheap, that even with higher taxes, it’s still cheaper to be business there. However, if we reduced our tax rates, the advantage of overall cost would shift back to the US in many of those cases.

                And yes, a VAT tax in many first world countries does many their taxes higher, in comparison to ours, but lowering our corporate income tax rate would make us more competitive than we already are with other first world countries.

                • Rufus

                  David,

                  We agree. We both agree this stuff is over our heads (and I’m saying that as someone who has worked overseas for a multi-national corporation and managed a practice for one of the top 4 tax accounting firms in the world!), and we both agree labor rates are what drive most labor overseas. And, I agree with what you write about how corporations set up divisions, etc. is based in part on local taxes. For similar reasons many, many U.S. corporations are headquartered in Delaware or Nevada, even if they do no work there.

                  I greatly admire what your friend does, by the way. Process Engineers are very cool folks to hang out with. They tend to be talented at cutting to the core of most issues.

  • David Marcoe

    It should be pointed out that the Fair Tax is only one suggested implementation of a consumption tax, with other ideas floating around. It’s not a new idea, by any stretch. Alexander Hamilton outlined the main advantage of it in Federalist 21:

    It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess…If duties are too high they lessen the consumption—the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens, by taxes of this class, and is itself a natural limitation of the power of imposing them.

    The disadvantage I’ve encountered in proposing it is a ubiquitous misunderstanding that it would be a tax in addition to other taxes. I believe the common experience and understanding of sales tax being a supplemental form of revenue leads to this misunderstanding. In contrast, a flat tax–”back of the postcard” tax–is very easy to understand and receives very positive feedback from the outset. In addition, many countries pursuing free market reforms have moved to a flat tax, as opposed to a consumption, for their main form of revenue. In fact, our own income tax started with a flat tax, with a four page tax code. Now, it’s 46,000 pages, with 16,000 pages of IRS rulings.

  • Adem O'Byrne

    This is the first time Sloterdijk has directly admitted his politics to the world. If you read most of his work, it’s difficult to get anywhere on how he views economic and social problems.

    It’s embedded within critique of cynical reason, but it’s still hard to tell due his inconsistencies. This article proves his relevance to our times.

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